I found the problem. I used .4 unlgp to extract all the files of the original magic.lgp, and everything seems to have worked beautifully.
I then used lgp to create a new magic.lgp, and again, everything seems to work
It's once I use unlgp on the newly created magic.lgp that the ff7 folder defaults to being put in the C:. Also, if I'm not mistaken, some of the files are being placed in different locations within the magic.lgp
I've been working on editing odin, and originally all his files are in the main section of the .lgp. So I replace those files with my new ones (that work using LGPTools A <> B replace) and create the new magic.lgp. Upon using UnLGP on this new one, however, those files are either missing, or have been relocated somewhere else.
It's getting late so I will see if I can find them sometime tomorrow.